Directions for my path from my current standing.

[Blaineatk]

I have actually considered the modular homes but the area I am in has restrictions that do not allow them. Though we do not have an HOA, the county has the restrictions for my area. I am building an elevated home on pilings since I am within view of the water and in a hurricane zone.

I really wish that I could get a modular, some of them are very nice! One issue I have seen with the modulars though is that they do not seem to appreciate in value as a regular stick built home will. This seems odd to me as from what I understand, the construction is regulated and built with more oversight. In my mind they should equally appreciate, correct?

 

[travelover]

............What I was attempting to describe by passive income was something like a rental income or another avenue that didn't require my physical, active involvement..........

I don't think many here who do rentals would agree with your definition of passive. Unless you hire a manager (which is in itself work, and an added expense), rentals take active physical involvement to attract and select tenants, protect, maintain and refurbish the properties, and evict the occasional flake.

 

[Blaineatk]

That is true, I am fairly familiar with the process of supplying rentals and have friends who do maint work on rentals. With the right property I believe I could make money. I do not believe that it will be my exit from my real job but if I can slowly acquire enough properties I think I would be able to make a solid income stream to the point where when I had a vacancy, the other properties would make up the difference for the lost rental income. If that makes any sense.

I think the acquisition would be slow in the beginning but if I was able to get a couple they could potentially compound my ability to gain the next one. Or is my mind out running the reality of the situation?

 

[travelover]

........ Or is my mind out running the reality of the situation?

There is no doubt that one can make money in rentals. The question was whether it was a passive, i.e. not physical, active involvement kind of endeavor. I think it is more work than, say, yearly balancing my Vanguard account.

 

[tbilltubbs]

For your investing education: https://www.bogleheads.org/

For your interest in rental housing: Mrlandlord.com Landlord Discussion Board

If you take the time to educate yourself on the above two forums, you will be ahead of 99% of the population regarding investing and landlording.

Good luck

PS: Don't mess with building your own house until you master the above.

 

[Blaineatk]

There is no doubt that one can make money in rentals. The question was whether it was a passive, i.e. not physical, active involvement kind of endeavor. I think it is more work than, say, yearly balancing my Vanguard account.

I agree with that, I imagine it would be more work than the contribution and balancing. At least it sounds like it would be. I know I have very little involvement in the contributing to mine as it is just an auto deduction from my account each month.

For your investing education: https://www.bogleheads.org/

For your interest in rental housing: Mrlandlord.com Landlord Discussion Board

If you take the time to educate yourself on the above two forums, you will be ahead of 99% of the population regarding investing and landlording.

Good luck

PS: Don't mess with building your own house until you master the above.

Thanks for the links! I have actually been checking the Bogleheads site. Another member sent me a message on here about it. They seem to have a lot of beginner information and where to start. They also seemed to cover more than just the basic investing ideals and including when you are financially ready to begin investing.

What is the reasoning in not building until having the above mastered? Not contesting your information, just curious as to the reason? Is it wise to continue renting from someone else?

 

[Blaineatk]

So, today I was able to get some information from my office about our 401(k) program and was able to login and see what fund I was contributing to. This is the one that I am currently using for my 401k Vanguard Target Retirement 2050( VFIFX Vanguard Target Retirement 2050 Inv Fund VFIFX Quote Price News ), the expenses are fairly higher than a couple of the others that I have available to me but do not seem to be a lot higher. It has about 9.6% bonds which are not a huge necessity at this point due to my age I am thinking. This also has an 18% turnover

One of the ones that I found myself interested in was the Fidelity Spartan 500 Index Advtg ( FUSVX Fidelity Spartan® 500 Index Advtg® Fund FUSVX Quote Price News ). The fees are a little less that a third lower 0.05% vs 0.18%, has no load, and has a lower turnover. From what I have been reading, an actively managed fund rarely beats the market and even the low percentage of the ones that do beat it can simply eat up the difference in fees and load. I am thinking that the lower turnover is due to the latter fund being an index. This has no bond content which is something that I should begin to add as I age.

Am I correct? I guess what I am looking for now is to ensure that my line of logic is making sense.

I think with the small amount of reading I have covered so far, I feel that I am already progressing and able to make decisions. Hopefully the right ones

 

[samclem]

So, today I was able to get some information from my office about our 401(k) program

Both of those funds are quite good--you are lucky to have them offered in your 401K program (many programs offer only funds with high fees). Either would be fine for you. The Vanguard Target Retirement 2050 is a great "one-stop" answer for most people, and even though you have many years to go, having 10% in bonds is fine--it decreases your expected total portfolio returns only very little and will help reduce year-to-year volatility. The Fidelity Spartan 500 is a very good US equity fund, but its stock exposure isn't quite as broad as those in the Vanguard fund (it's just got large-cap US stocks, not the smaller companies). One reason the Vanguard fund may show slightly higher expenses than the Fidelity Spartan 500 fund is that it's a little costlier to hold/trade some of the smaller stocks, the foreign stocks it has (and which you'll want--if you believe in diversification) and bonds in the Vanguard fund. But those smaller stocks can be expected to have slightly higher returns (overall--averaged over many years) than the S&P 500. Also, note that the Vanguard target date fund will slowly over many years, increase the %age of bonds. This is a traditional approach that many investors use, reducing their stock exposure as their timeline to retirement decreases.
I would leave things just as they are until you can read more and build an asset allocation plan that covers your tax-deferred and taxable accounts, and do everything at once.

 

[target2019]

Blaine,
FUSVX is a good choice. I agree with the idea that you are young and would do well to focus on large cap US in your 401k. Do you have a small cap fund there?

 

[Hermit]

On building your home:

Sounds like you have it pretty well in hand. If you are working with a general contractor, the price may go up in your area because he has to pay more for skilled and unskilled labor.

If I were in your shoes, I would have everything nailed down including the kitchen sink, appliances, fixtures, etc. Then don't change a thing during construction. I would also make sure the contract had start and complete dates during the time you are in the area. Six months should be plenty of time to complete a small home especially if there will be no changes.

 

[mh]

I have actually considered the modular homes but the area I am in has restrictions that do not allow them. Though we do not have an HOA, the county has the restrictions for my area. I am building an elevated home on pilings since I am within view of the water and in a hurricane zone.

I really wish that I could get a modular, some of them are very nice! One issue I have seen with the modulars though is that they do not seem to appreciate in value as a regular stick built home will. This seems odd to me as from what I understand, the construction is regulated and built with more oversight. In my mind they should equally appreciate, correct?

Check out this web site - you might find their offerings interesting

I believe they can be built on pilings and they have high wind load versions of their stuff


http://www.rocioromero.com/LVSeries.html

http://www.rocioromero.com/faq/LV_series_FAQ.pdf


Sent from my iPhone using Early Retirement Forum

 

[pb4uski]

I have actually considered the modular homes but the area I am in has restrictions that do not allow them. Though we do not have an HOA, the county has the restrictions for my area. I am building an elevated home on pilings since I am within view of the water and in a hurricane zone.

I really wish that I could get a modular, some of them are very nice! One issue I have seen with the modulars though is that they do not seem to appreciate in value as a regular stick built home will. This seems odd to me as from what I understand, the construction is regulated and built with more oversight. In my mind they should equally appreciate, correct?

I would think so, but there is a lot of ignorance and misunderstanding out there. Having been through a couple modular factories, they are essentially stick built in a large building. The only trick is making sure that the modules mate correctly in the field. They are more prevalent in our area and I think the perception of them is changing. The two I am most familiar with are pretty high end lakeside houses.

I think a case could be made that they are more solid because they tend to use both glue and fasteners more frequently than stick built homes.

 

[travelover]

.......... they are essentially stick built in a large building........

Such a ridiculous concept. I always have my cars assembled in my driveway.

 

[pb4uski]

With modular, your house (or the materials used to build a house) doesn't get rained or snowed on... that's a plus in my mind.. not to mention the time wasted removing snow or water and letting things dry out before proceeding.

 

[DrRoy]

Just a couple quick things, Blaine. First, congrats on your income, and kudos for your attention at your age on building wealth for the future. I am not going to make any specific suggestions, as you have gotten a lot of very good advice above. I mainly wanted to give an additional vote that this advice is good, and you will do well to absorb and apply the information to your situation. Also, part of learning is doing. You will get better at investing as you get out there and gain experience with it. I say that as someone who has made mistakes but still got to FI. Good Luck, and don't think you have to be 100% right with every decision to succeed.

 

[Blaineatk]

Blaine,
FUSVX is a good choice. I agree with the idea that you are young and would do well to focus on large cap US in your 401k. Do you have a small cap fund there?

I can check on a small cap fund. I believe that we do, I know for sure that we have some small cap funds that I looked at as well. I have not read on what they are comprised of yet. I will get back to you on this.

 

[Blaineatk]

On building your home:

Sounds like you have it pretty well in hand. If you are working with a general contractor, the price may go up in your area because he has to pay more for skilled and unskilled labor.

If I were in your shoes, I would have everything nailed down including the kitchen sink, appliances, fixtures, etc. Then don't change a thing during construction. I would also make sure the contract had start and complete dates during the time you are in the area. Six months should be plenty of time to complete a small home especially if there will be no changes.

I agree, I do not want anything extravagant. Everything will be off the shelf items that can be bought here locally without any "custom" details. When I had the architect design the home, I discussed making it as efficient as possible with plumbing and wire runs so we could keep materials to a minimum and not have a plumber and electrician having to make crazy runs. I wanted it all to be simple and compact.

The idea for the labor would make sense if the same builders weren't building just 10 to 15 minutes north of where I am for much cheaper. It seems that they are charging for the location. I think it is assumed that since it is a fairly "affluent" area, that we are all wealthy and willing to pay more or have the ability. I am not sure, just seems this way to me. I guess you pay for your thrills or views.

I absolutely want to have everything picked out and priced out before construction begins. I have also been considering purchasing some things before hand to minimize the amount financed. I was looking into pre purchasing things like sinks, cabinets, faucets, flooring, etc. I am not sure if it would save me anything though over the long run due to the builders getting a discount when they do the bulk order for construction, or so I hear.

 

[samclem]

I can check on a small cap fund. I believe that we do, I know for sure that we have some small cap funds that I looked at as well. I have not read on what they are comprised of yet. I will get back to you on this.

Your Vanguard 2050 Target Date fund already contains small cap stocks. The US equities in that fund represent the total US stock market and are capitalization weighted. So, it has just the same weighting of small caps as the US market has (unlike the Fidelity Spartan S&P 500 fund, which is just very
large companies and has no small cap stocks). You may decide later that you want to be overweight in small companies, and then you'd need to find a small cap fund. But until then, the Vanguard 2050 Target date fund will probably do fine.

 

[Blaineatk]

Just a couple quick things, Blaine. First, congrats on your income, and kudos for your attention at your age on building wealth for the future. I am not going to make any specific suggestions, as you have gotten a lot of very good advice above. I mainly wanted to give an additional vote that this advice is good, and you will do well to absorb and apply the information to your situation. Also, part of learning is doing. You will get better at investing as you get out there and gain experience with it. I say that as someone who has made mistakes but still got to FI. Good Luck, and don't think you have to be 100% right with every decision to succeed.

I appreciate the kind words and thoughts on the advice given. It is good to be a member of a group with so many contributing members who concur on an idea, especially when many of them have found success in the mentioned topics!

I'm sure on my journey there will be stumbles and hurdles even after I am knowledgeable on the topics, you can not be right all the time.

 

[Blaineatk]

Your Vanguard 2050 Target Date fund already contains small cap stocks. The US equities in that fund represent the total US stock market and are capitalization weighted. So, it has just the same weighting of small caps as the US market has (unlike the Fidelity Spartan S&P 500 fund, which is just very
large companies and has no small cap stocks). You may decide later that you want to be overweight in small companies, and then you'd need to find a small cap fund. But until then, the Vanguard 2050 Target date fund will probably do fine.

The small cap companies have more volatility and risk but the chance for them to blow up is greater than with the slow, steady growth of the larger companies, correct?

With this being true, I should use a fund like this while I am younger and can recover from a downfall. Maybe only do a percentage of my portfolio in the small cap fund and decrease it over time, reducing the risk involved?

I will do more research and reading on the topic. I wasnt able to read much today and probably wont be able to do much tomorrow. I have a spearfishing charter that I have to run and then go visit some family. Should be able to get back to it soon. When I get back to work I will be loaded with free reading time!

 

[samclem]

The small cap companies have more volatility and risk but the chance for them to blow up is greater than with the slow, steady growth of the larger companies, correct?

With this being true, I should use a fund like this while I am younger and can recover from a downfall. Maybe only do a percentage of my portfolio in the small cap fund and decrease it over time, reducing the risk involved?

Yes, the small companies are a bit more volatile, and they do offer (on average) higher growth rates than larger companies. But small caps, large caps, value stocks, growth stocks, foreign stocks, US stocks, bonds-- they all have their turn in the spotlight. That's why you want a diversified portfolio, and why you'll rebalance it, selling off higher priced assets and buying those which have
lagged.

I would invest in the whole US market now, and keep doing that. As you near retirement you may want to reduce volatility by reducing the total percentage of equities, but I would not recommend skewing to large caps and away from small caps.

 

[Blaineatk]

Yes, the small companies are a bit more volatile, and they do offer (on average) higher growth rates than larger companies. But small caps, large caps, value stocks, growth stocks, foreign stocks, US stocks, bonds-- they all have their turn in the spotlight. That's why you want a diversified portfolio, and why you'll rebalance it, selling off higher priced assets and buying those which have
lagged.

I would invest in the whole US market now, and keep doing that. As you near retirement you may want to reduce volatility by reducing the total percentage of equities, but I would not recommend skewing to large caps and away from small caps.

Thanks for the advice, noted!

 

[target2019]

Blain,
An assumption I was making on your portfolio is that you wanted to move away from target fun and save on expenses a bit. Also ditch the bond allocation while young. If I've misinterpreted your thoughts please let me know.

I myself would go with FUSVX as a major piece, and add in small!midcap, aka completion index. All of your thoughts above on small cap are correct. I still work, and am just now throttling back on my overall small!midcap allocation.

 

[samclem]

One nice thing about Vanguard's target date funds is that they add no fees or expenses above the ERs of the included funds (which are already among the lowest in the industry). So, whether you are watching your holdings, or out ona boat at work, or on vacation in Bermuda, they are rebalancing your assets to sell high/buy low every day-at no cost to the investor. The 2050 Target Date fund has an ER of just .18%, and it covers a lot of assets that would normally require higer ERs in a standalone fund (things like small stocks, foreign stocks, etc). It is a super standalone holding, or can serve as a good "core" fund to be augmented by other funds if an investor sees some reason to tilt holdings a bit. But, given actual investor behavior, a portfolio of just the Vanguard Target Date fund would produce better results than about 90% of investors get.

 

[Blaineatk]

One nice thing about Vanguard's target date funds is that they add no fees or expenses above the ERs of the included funds (which are already among the lowest in the industry). So, whether you are watching your holdings, or out ona boat at work, or on vacation in Bermuda, they are rebalancing your assets to sell high/buy low every day-at no cost to the investor. The 2050 Target Date fund has an ER of just .18%, and it covers a lot of assets that would normally require higer ERs in a standalone fund (things like small stocks, foreign stocks, etc). It is a super standalone holding, or can serve as a good "core" fund to be augmented by other funds if an investor sees some reason to tilt holdings a bit. But, given actual investor behavior, a portfolio of just the Vanguard Target Date fund would produce better results than about 90% of investors get.

Good to know!

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